KS, their position is quite healthy....no debt, $3.8M as at the...

KS, their position is quite healthy....no debt, $3.8M as at the last quarterly.

Revenue was well down as you point out for the combined reasons of lower production and oil falling to the low 30's. Even at this low level they were cash flow positive as reported by the company.

With oil now above $70 they will be making significant positive cash flow after accounting for heavy oil and royalties. In fact this oil price is higher than when the Salinas business case was concieved back in 2005.

Production decline is a well known characteristic of all oil fields. In tha case of the NSA field remedies include drilling more laterals, even verticals aand/or steam injection. Salinas deferred these remedies while the oil price was low but they will now stand on their own merits.

Marsup recently gave an update following a phone conversation with the company. Remedial work on the new lateral at NSA has been completed with a positive result.

I suspect that planning issues will look quite different now to when the oil price was $32 six months ago.

Action pending includes East San Ardo drilling, Paris Valley, flow updates from NSA, farm in progress and seismic/exploration scheduling.